WASHINGTON—Federal regulators are likely to take action before
summer's end against Fiat Chrysler Automobiles NV over lapses in
handling older Jeeps tied to fiery rear-end crashes and millions of
other recalled vehicles, the head of the National Highway Traffic
Safety Administration said.
Mark Rosekind, the agency's chief, on Thursday said he expected
to penalize Fiat Chrysler by as soon as the end of July and
"absolutely" before Sept. 7. He said the agency could levy fines
and force vehicle buybacks if regulators determine the company
violated federal law governing how auto makers must conduct
recalls. The agency and the company could also settle, he said,
with Fiat Chrysler signing a consent order admitting to certain
lapses and agreeing to penalties.
Mr. Rosekind's comments, following an unprecedented regulatory
hearing at U.S. Transportation Department headquarters, ratcheted
up simmering tensions over allegations that Fiat Chrysler has
misled and obstructed auto-safety regulators.
During Thursday's hearing, regulators said the auto maker hasn't
performed adequate repairs or properly alerted car owners or the
government to safety problems with more than 11 million vehicles
spanning 23 recalls. Asked if he could foresee avoiding an
enforcement action against Fiat Chrysler, Mr. Rosekind responded:
"No."
Regulators have "raised some legitimate questions about the way
[Fiat Chrysler] has managed certain safety recalls," said Scott
Kunselman, the company's senior vice president for vehicle safety
and regulatory compliance, addressing NHTSA officials during the
hearing. The auto maker "could have done better in carrying out the
campaigns you identified. We have learned from our mistakes and
missteps," he said.
He said Fiat Chrysler created a new employee position to monitor
recalls and alert him and regulators to problems. In addition, the
company is working with suppliers to quicken design and production
of repair parts.
A Fiat Chrysler spokesman declined to comment on Mr. Rosekind's
remarks.
The sustained scrutiny over Fiat Chrysler's handling of vehicle
safety comes at a delicate time for the auto maker, as Chief
Executive Sergio Marchionne seeks a merger partner in part to help
defray looming costs for technology and emissions compliance.
Depending on the outcome of regulators' probe, Fiat Chrysler could
be forced to pay hundreds of millions of dollars in fines. Later
this month, Fiat Chrysler will appear before a judge to argue for a
new trial in a Georgia case where a jury awarded $150 million of
legal damages over the death of a 4-year-old boy in a Jeep
fire.
With older Jeeps featuring rear gas tanks under scrutiny for
their potential to catch fire in rear-end crashes, Fiat Chrysler
resisted requests from regulators to test a suggested fix and
lagged behind in producing parts for repairs and getting vehicles
serviced, an official in NHTSA's defects investigations office
said.
Witnesses at Thursday's hearing read prepared statements without
taking questions. In addition to auto regulators, safety advocates
and consumers decried Fiat Chrysler's handling of more than 1.5
million recalled Jeeps and other defective vehicles.
Clarence Ditlow, executive director at the Center for Auto
Safety, said Fiat Chrysler uses vehicle-owner notification letters
to "get out of jail" and then delays carrying out repairs. The
father of a 17-year-old boy killed in a fiery rear-end Jeep crash
in November 2013 said he didn't receive a recall notice about the
vehicle until long after the accident.
Fiat Chrysler sought to have Thursday's hearing canceled,
arguing it had taken steps to improve its approach to safety
defects and fares better than the industry average in completing
recalls.
Fiat Chrysler is installing trailer hitches on the backs of
recalled Jeeps to provide better protection in lower-speed
collisions. Federal regulators have noted that only 21% of recalled
Jeeps had been repaired as of April 30.
Mr. Ditlow expressed concerns about dealers declining to install
trailer hitches on rusty Jeeps. A Fiat Chrysler spokesman Thursday
said the company will repair vehicles "that will accommodate
service."
The company says it has now addressed more than a half million
of the Jeeps, some of which previously featured trailer hitches and
didn't need repairs.
Still, the rate of repairs "are not in line with Fiat Chrysler's
own projections or NHTSA's expectations," said Scott Yon, chief of
the vehicle integrity division in NHTSA's Office of Defects
Investigation, during the hearing. He said the auto maker's recall
performance differs from peers.
"Fiat Chrysler takes a long time to produce the parts needed to
get vehicles fixed," he said. He added that dealers have problems
getting parts, customers face difficulties getting repairs and
proposed fixes often don't remedy vehicle defects.
Other NHTSA officials pointed to the auto maker providing
misleading or inaccurate information to the agency and failing to
notify vehicle owners about recalls within 60 days of telling
regulators about safety defects.
Regulators before Thursday's hearing already "tentatively
concluded" the auto maker suffered lapses handling recalls. Other
recalls being scrutinized include those involving Fiat Chrysler
vehicles equipped with rupture-prone air bags manufactured by
Takata Corp. of Japan. Another recall involves ignition switches
that can slip out of the run position, cutting engine power and
disabling air bags.
In addition, regulators have opened investigations into recalled
Fiat Chrysler vehicles that continue to catch fire after inadequate
repairs to headliner wiring; inadvertent air-bag deployments that
continue after attempted fixes; and delays in addressing vehicles
with defective left tie rod assemblies.
Fiat Chrysler in June 2013 agreed to recall roughly 1.56 million
Jeep Grand Cherokee and Liberty sport-utility vehicles with model
years ranging from 1993 to 2007 and gas tanks installed behind the
rear axle.
More than a million others are subject to a "customer
satisfaction campaign" in lieu of a recall. Regulators, after
previously requesting those Jeeps be recalled, later determined
they posed no unreasonable safety risk.
Fiat Chrysler's Mr. Marchionne met privately with senior
regulators in June 2013, leading to a deal for the limited recall
with no admission the vehicles were defective.
Fiat Chrysler says the Jeeps are safe and that other vehicles,
some with similar fuel-tank designs, are more often involved in
fiery crashes. The company contends the recalled Jeeps only catch
fire in severe, high-energy crashes and that the vehicles met
government safety standards in place when they were sold.
Write to Mike Spector at mike.spector@wsj.com
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